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Your retirement can impact the economy

28 Aug 2019

By Vimal Chagan, Liberty Divisional Executive: Savings Investment Solutions

South Africans are conscious of the many financial challenges the country is currently facing. However, many of us don’t realise that one of the most severe dangers could be coming from our own bank account. Most South Africans don’t think about saving or take a long-term approach to their finances. Savings tend to come last because people don't really understand its benefits or can't afford to increase their savings.

The proof is in the figures. According to the latest South African Reserve Bank figures, the average South African household saves just 1.4% of their salary every month. In fact, savings have declined 0.2% - at the end of 2017 it was 1.6% - and is likely to be lower still in 2019. To put that in perspective, the average adult in America saves 6.1% of their monthly salary. In the developing world, Brazil’s latest gross savings rate is 14.2%, while India hovers around 30% most years.

In South Africa, there is a huge emphasis on consumption and government spending, and this was at the expense of investments and savings. Everyone wants the newest cell phones, but what’s the implication of that purchase for future years?

If you haven’t saved enough, you’re pushing the pressure onto someone else. If you have not saved for retirement this puts additional pressure on breadwinners and on the state. The burden on the state is more so when government needs to spend more to look after us, so we are taking money away from other projects that government can invest in, ultimately reducing future tax receipts.

If you're concerned about your retirement and if you can afford to cut on spending to increase your retirement contributions, then now is the time to act. You wouldn't want to reach retirement age and burden your family or rely on the state for financial support.  We should lead by example. If our children see us relying on them in retirement years without savings of their own, that’s also likely to affect them in other ways.

Check if you're on track with your retirement investments

All of this shows the real need for adequate retirement savings. Quite simply, we are getting to the point where the tax-paying population are unwilling to be taxed any further and, in time, loved ones may not be able to support us either.

Liberty's Retirement Calculator is a great tool to help you asses if you're on track with your retirement planning. It helps you to work out how much you need to invest now in order to have the retirement you want and not be a burden on your family or the state.  If you have already started planning for your retirement, you should input your existing and this will be factored into the calculation.

Click here for  the Liberty Retirement Calculator and work out how much you need to save for your retirement.

Liberty Group Limited is a Registered Long-Term Insurer and an Authorised Financial Services Provider (FAIS nr 2409).

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Liberty Group Limited (Reg. no 1957/002788/06) is a licensed Insurer and an Authorised Financial Services Provider (no 2409).